Byron Wien, Chief Investment Strategist of Pequot Capital Management since 2005 (before Senior Investment Strategist of Morgan Stanley) has published his forecasts for 2005.

1. Crude oil takes the trophy for the most volatile commodity of the year. After dropping to $30 a barrel, it rises to $60 as a result of supply/demand imbalances and disruptions in shipments. There are no drawdowns of the Strategic Petroleum Reserve, but drilling in the Arctic National Wildlife Refuge passes in Congress.
2. While the Bush Administration continues to support a strong dollar policy, it also maintains that market forces should be way to a sharp drop, and the euro goes to 1.50 and the yen to 85. Europe and Japan call for a second Louvre Accord to reverse the trend. In spite of the currency weakness, the US trade deficit continues to rise.
3. The yield on 10-year US Treasury Notes rises to 6.00% in the second half of the year. Among other causes, Japan and China reduce their purchases of US bonds. Although inflation remains moderate and the economy is not overheating, the Federal Reserve raises rates at every meeting and the federal funds rate ends the year at 4.25%. Greenspan admits that "real rates have been too low for too long.
4. The US equity market goes nowhere after two years of gains. Responding to higher interest rates, excessive investor optimism, continuing international tension, a declining currency, and an overextended consumer, the S&P 500 ends the year flat in spite of a reasonably strong economy and corporate earnings improvement.
5. Resisting pressure from its trading partners, China refuses to change its currency system. It rejects the "basket of currencies" approach, saying it prefers. to remain pegged to the dollar because of a commitment to economic stability, employment increases, and a continuation of reforms. China's growth stays near 9% as it expands its infrastructure and industrialisation westward. Commodity prices persistently rise, and certain chemical stocks do well.
6. Japan slips back into recession as the yen strengthens and exports to China prove inadequate to keep the economy going. Investors begin to question the ability of Japan to thrive as a high-cost producer in a low-cost region. The Nikkei 225 approaches 10,000 again.
7. Vladimir Putin's hard-line policies finally prove too much for the Russian people. Revelations of widespread corruption, on top of the Ukraine election controversy, precipitate a second Russian Revolution, and Putin resigns. The economy slumps, the ruble weakens, and the Russian market declines 25%.
8. While oil and gas producers and refiners and marketers do well in the US equity market, oil service and other energy infrastructure stocks are standouts. Coal also continues its resurgence, and stocks with major coal exposure have substantial upside.
9. Following a terrific 2004 harvest that drove some agricultural commodities to distressalevels, the summer growing season is alternately too cold or too hot, rain is infrequent, and worldwide food demand increases. Corn, soybean, and wheat prices rise sharply. Companies entering the year with large inventories are big winners.
10. The Bush Administration overreaches on domestic economic legislation. Citing the high transition costs and the uncertain benefits, both Republicans and Democrats defeat partial privatisation of Social Security. The year isn't a total washout, however. Congress confounds the sceptics and puts limits on plaintiffs' lawsuit damages. Concern about a doctor shortage outside of major cities convinces a number of Democratic members to support tort reform.